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Our Inefficient Acres 


Hea VN DE RITP 


PRESIDENT THE NATIONAL Crty BANK OF NEw YoRK 


ADDRESS BEFORE 
THE AMERICAN COTTON 
MANUFACTURERS ASSOCIATION 
APRIL 27, 1914 
NEw YORK 


Digitized by the Internet Archive 
in 2021 with funding from 
University of Illinois Urbana-Champaign Alternates 


https://archive.org/details/ourinefficientacOOvand_0 


Our Inefficient Acres 


The plan which your chairman has outlined for the creation of a 
comprehensive warehouse system, to be operated in a manner which 
will give the broadest currency to credit obligations based on cotton 
stored in these warehouses, is both interesting and significant. It is in- 
teresting as showing the tendency toward an important movement in the 
cotton trade. It is significant in indicating an awakening on the part of 
business men to certain distinctions in banking credit that are of great 
importance. 

During the discussion connected with the enactment of the new 
banking law, there has been much education of bankers and business men 
alike on the subject of ideal banking credit. Not having reached, in all 
respects, the settled commercial status that we find in some of the Euro- 
pean countries, we have failed here to draw the distinction that is so 
clearly drawn in most European banking centers between loans for capital 
purposes and loans of a self-liquidating character, the funds for the re- 
payment of which must naturally and almost inevitably come promptly 
into the hands of the borrower in the seasonal course of his business. 

Our new banking act was designed to accomplish various things. 
In the minds of some of its advocates, the things sought to be accom- 
plished I fear were not entirely economic. But the fundamental economic 
principles back of the idea which led to this legislation prominently in- 
cluded the creation of a discount market. That is to say, the creation of 
a form of bankable paper which would be so secured through the names 
of acceptors and endorsers that the credit risk disappeared and the paper 
would find a ready market wherever there was money to loan, even 
though there existed in those quarters no knowledge regarding the credit 
of the original maker. Whatever will tend toward the creation of such a 
discount market will be helpful in lowering the rate of interest which the 
commerce of the country must pay. Whatever will tend to give broad 
currency to commercial paper, a currency wider than any knowledge of 
the maker’s credit, will tend toward an equalization of rates, toward 
sounder banking conditions, and toward a lowering charge on commerce 
for interest. Such a proposition as has been here presented for giving 
a wide currency to loans made against cotton in warehouses, is a funda- 
mental movement, the first among a good many others now gathering 
force, I believe, that will eventually lead to a great discount market, 
where idle funds from the whole country and, indeed, from international 
money centers, may find sound investment in short term commercial 
credits. 


It seems to me admirable that you men who are interested in cotton 
manufacturing are thinking of some improvements in underlying methods 
which may help you in the conduct and extension of your business. The 
business of cotton spinning and weaving cannot be cited as one of the 
phenomenal industrial developments of America, at least not in its recent 
years of history. Your business has grown and it would be easy to present 
statistics that would be flattering to your management. On the whole, 
however, looked at from a world point of view, the cotton manufacturing 
business in America in recent years only about held its own in compari- 
son with world development. While great growth is shown, quite as great 
growth is exemplified in the statistics of some other countries. With all 
the advantages of location in the midst of the production of two-thirds 
of the world’s supply of raw material, with the greatest homogenious 
market in the world right at your hand, and that protected from foreign 
competition by high tariff, with the advantage of having the lowest rates 
of transportation of any country in the world, and of being historically 
a people of the greatest mechanical genius,—in spite of all these ad- 
vantages, we have not seen the cotton manufacturing business in this 
country forge ahead as have many great lines of industry. 


The United Kingdom, importing every pound of cotton she manu- 
factures, is still the world’s great cotton mill. British spinners export as 
great an aggregate of cotton manufactures in a month as you do in a 
year. In fact, the United States takes its place alongside of India in its 
ability to supply the outside world with manufactured cotton goods. 
Germany exports well over twice as much as we do, and our total is ex- 
ceeded by Belgium, France, and even little Switzerland. In the light 
of these facts, it is obvious that while in a protected market of gigantic 
extent, we have been able to build up the greatest spinning business of 
any country in the world, we still are not fully supplying our own do- 
mestic market, importing over $60,000,000 worth of cotton goods annu- 
ally, and the advantage of great manufacturing units have not enabled 
us to get our costs down to a point to make us even a factor of the first 
order in the world’s markets for manufactured cotton. It well behooves 
you who are interested in this business, therefore, to think broadly and 
deeply on fundamental subjects in a way that may tend to cheapen your 
cost of production, and put you in line with the other great cotton manu- 
facturing nations for world competition. 


One important element in the cost of production, of course, must 
always be the cost of capital, and you are undoubtedly taking a step in the 
right direction when you endeavor to give a more universal character 
to that part of your credit operations which can be based directly on 
stored raw material, and by doing that make that portion of your capi- 
tal cost you less, because the security for your loans will be more broadly 
understood and the capital attracted to them come from wider fields. 


Broadly speaking, the cost of a manufactured product up to the 
point of distribution is made up of the price of raw material, expense of 
transportation and the actual cost of manufacture. The cost of raw ma- 
terial at its point of production is substantially the same to all users. 
The cost of transportation from field to mill is measured approximately 
by distance, and here you have great advantage over all your foreign 
competitors. The cost of manufacture is made up of many elements, but 


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among the principal ones are the cost of capital, the perfection of 
mechanical equipment, and the price and efficiency of labor. 

On the side of the cost of labor, you cannot hope, nor should you 
hope, to make that item in your cost sheet at all comparable with the 
same item in the cost sheets of your foreign competitors. At the risk 
of sounding a discordant note, I will say that in my opinion you will 
not permanently reduce your labor cost by trying to compete through 
the employment of child labor with the lower labor level of other 
countries. I believe you must find ways of meeting world competition 
other than in the per diem cost of the labor item. Whether or not you 
have done everything you can in the perfection of mechanical equip- 
ment is a technical question, of which you are a far better judge than 
I can be, but it is at least obvious to a layman that the United States 
is not taking the great lead in inventive appliances in cotton manufac- 
turing that it has in some other fields, and it would seem, therefore, 
that there might be opportunity there to do something toward meeting 
foreign competition. 

The great advantage which you hold is in cost of transportation. 
In view of high labor cost, there are impressive obstacles in the way 
of your meeting world competition by reducing the cost of manufacture. 
If the cost of raw material were reduced, however, the importance 
of the element where you have the advantage over all the world, the 
cost of transportation, would in time be further emphasized. Would 
it not seem, therefore, that one of the directions toward which this 
country might best turn its attention in any effort to take its place in 
world competition in this field should be in the reduction of the cost of 
raw material? 

Although we supply nearly two-thirds of the raw cotton of the 
world, I still believe that we present, in our methods of cotton pro- 
duction, one of the most gigantic examples of incompetency to be 
found anywhere. The huge and rapidly growing totals of our cotton 
crop are sources of satisfaction until we examine them in connection 
with our acreage. That examination discloses four-tenths of a bale 
an acre is about the average of our production. In that figure, I believe 
is to be found an important indictment against the United States, 
although it is by no means a type of indictment that lies solely against 
the cotton planters of America. 

The great bankers of Europe have a practice, that I think might 
well be copied in this country, of issuing annual reports in which are 
to be found a broad and stimulating discussion of current, financial and 
economic conditions. I have just been reading the annual report of the 
Deutsche Bank, the great financial institution in Germany. After pre- 
senting some statistics of imports and exports of the leading countries 
of the world, showing Germany in a position second only to Great 
Britain, and away ahead of the United States, and indicating how, owing 
largely to favorable trade balances, the stock of gold held by the Reisch- 
bank increased during the year under review by nearly $100,000,000, 
there occurs this paragraph: 

“Tt is not to favorable climatic conditions alone that Ger- 
man agriculture is indebted for plentiful and increased returns. 
The following comparison of the produce of the leading agri- 
cultural countries will show to what extent progress has been 


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made in the development of German soil through industrious 

work as well as through expenditure of capital in the shape of 

artificial fertilizers, machinery and electrical power.” 

In the table which follows, the crop returns are shown for the 
leading countries of the world and for the principal agricultural prod- 
ucts. We must remember that Germany is not a fertile country. What- 
ever German agriculture wins from the soil must come through hard 
work and intelligent methods. That country has nothing comparable to 
the natural advantages which we enjoy. These comparative crop returns, 
therefore, are all the more significant. 

This table of comparative yield shows that Germany produces per 
acre 18 hundredweight of wheat against 8% in the United States; 14.7 
hundredweight of rye against 8.4 in the United States; 15% hundred- 
weight of oats against 10.7 in the United States, and 120 hundred- 
weight of potatoes against just half that figure in the United States. 
The United States and European Russia fall into the lowest class of 
production, and even Canada in every item shows a greater yield 
than do our own acres. Europe produces no cotton and therefore a 
similar unfortunate comparison cannot be made with our cotton yield, 
but what is perhaps still better, we can make comparison of our acreage 
yield with the easy possibilities under intelligent cultivation of what 
our own acres have been made to produce. 

We are now devoting about 35,000,000 acres to the production of 
cotton and a good crop. is about 200 pounds of ginned cotton an acre. 
The Department of Agriculture, which seems to be the one arm of our 
government truly devoted to upbuilding and intelligent development of 
our resources, has demonstrated beyond any question what a shame- 
fully small average yield this is. 

At the present time, the government has an arrangement with 
about 525 county agents in Southern territory where cotton is the 
principal crop. These county agents carried on demonstrations with 
12,000 individual farmers last year. The area involved was 104,000 
acres. On these acres, the Department’s instructions were carried out 
by the farmers with their own tools, teams, labor and fertilizer, the 
Department merely furnishing the instructions. The result was an 
average yield of 1,005 pounds of seed cotton per acre. In the states 
where these experiments were carried on, the present average yield 
is 546 pounds of seed cotton per acre. It is, therefore, claimed by the 
Department of Agriculture that as a direct result of. the instructions 
given to a limited number of farmers, the number of pounds of seed 
cotton produced was increased by approximately 95%. 

As an illustration of what can be done, the Department of Agri- 
culture cites the case of an old negro farmer near Marion, Alabama. 
This old colored man by economy and hard work covering a number 
of years, acquired a farm of 163 acres, but his land was poor, and 
not infrequently he found it did not produce even enough for seed. 
It occurred to him he might get better results by confining his efforts 
to a smaller acreage. He selected two acres near his cabin and prac- 
tically abandoned the remainder of his farm. For years he has devoted 
himself to increasing the producing capacity of this small area. He 
went to work first to fertilize the two acres. He hauled into the field 
and plowed under dead leaves and other decaying vegetation from the 


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nearby woods, cotton stalks and corn stalks, until he had brought the 
fertility of this little plot of ground up to a high state. So that in one 
year recently he succeeded in growing five hundred and six pounds 
of cotton on a measured one-eighth of an acre. This is at the rate of 
eight bales per acre, and although this man is advanced in years, his 
ambition yet is to produce nine bales of cotton to an acre, and the 
Department of Agriculture is inclined to think that he will accomplish 
that result. 

The Department of Agriculture has been sending experts into the 
cotton belt who have taught the planters the benefits of good cultiva- 
tion, rotation of crops, care and selection of seed, and the advantage 
of co-operation among the farmers themselves in securing uniformity 
in the kind and quality of the cotton raised. The results so far obtained 
are filled with promise. In many instances, the acreage yield has been 
increased to as high as two bales per acre. 

The boll weevil continues its ravages through a large section of 
the cotton belt. The total loss in cotton production in the United States 
due to the boll weevil up to this time is believed to be in excess of 
10,000,000 bales, which at the low value of $50 per bale, not counting 
the loss of seed and cost of fighting the pest, represents a loss of 
$500,000,000. This estimate covers only the loss incurred in acres 
planted to cotton and takes no account of the reduction in production 
due to fear of the ravages of this insect. 

The experts are making progress in fighting the boll weevil, prin- 
cipally through the new methods of cultivation. Through their efforts 
in many sections of the infested regions, planters have been able to 
secure an average crop. 

In the agricultural appropriation bill now pending in Congress 1s 
an item of $46,000 to continue the Department’s efforts to control dis- 
ease of cotton and other crops. Another paragraph appropriates $180,000 
for investigating the ginning, handling, grading, baling, gin compressing 
and the establishment and demonstration of standards for the different 
grades of cotton. Of this sum, $60,000 is to be used in testing the waste, 
tensile strength, and bleaching qualities of the cotton as standardized 
by the government. Another section appropriates $628,240 for farmers’ 
co-operative demonstrations for the best methods of meeting the ravages 
of the boll weevil. 

An important work is being done by the cotton experts of the 
government in the introduction of long fibre Egyptian cotton in the 
southwest, especially in Arizona. This work may increase the area of 
our cotton belt. A year ago the Arizona farmers in and about the Salt 
River Valley planted approximately 4,500 acres in Egyptian cotton. 
About 3,500 acres came to maturity the next year. The remaining 
1,000 acres failed by reason of lack of water, poor cultivation and other 
hazards. But of the acreage which survived, the total yield was 2,200 
bales for the 3,500 acres. Of this high-grade cotton, the United States 
imports each year about 100,000,000 pounds, at a cost of approximately 
$20,000,000, the price per pound in many cases being 50% more than the 
average American cotton, except the Sea Island varieties 

The planters in the southwest, in consequence of the fact that 
the yield per acre of the 1% inch fibre Egyptian cotton is fully as 


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great as cotton in the Southern States, with the price much higher, 
have planted this year about 15,000 acres. The prospect is that this 
acreage will be greatly increased during the next few years. 

From the demonstration which the Department of Agriculture 
has made, covering wide territory and many seasons, it is, I believe, 
a safe assertion that thoroughly efficient methods of cultivation would 
double our cotton crop on the same acreage now devoted to that staple. 
The world will be ready to consume that increase as soon as, under 
the most optimistic view, we may hope that it will be accomplished. 
I believe there is no more important service that you men who are 
engaged in the cotton manufacturing business can perform looking 
to the development of the cotton industry than to do all that you can 
to awaken public sentiment to the need for efficient methods of cotton 
cultivation. A realization of such improvements in methods as this 
branch of the government is trying to bring about will do more toward 
the upbuilding of your business, it seems to me, than you are likely to 
accomplish with the same effort in any other direction. 

We are today a nation grown critical of business methods and 
resentful of business accomplishment. By far the greater part of govern- 
ment energies, as related to business, are directed toward destructive 
rather than constructive and creative ends. Business men have been 
called to account by Congress, commissions and courts, and are being 
punished for past deeds and hampered in present activities. The man- 
agers of railroads, although they have given to the public an average 
freight rate much less than what similar service costs in other countries, 
are bound with ever increasing bonds of hampering regulations, and are 
held to the strictest accountability for any failure of administration 
which falls below a hundred per cent. of efficiency. Directors of railroad 
property are told what they owe to the people in the way of wise and 
efficient management, and in spite of results attained, with which the 
results in no other country are comparable, they are held up to the pub- 
lic almost in the light of criminals, compelled to perform their daily task 
under the regulating eye of agents of the government. If that is a fair 
measure of the duty to society which the managers of public utilities 
may rightfully be expected to perform, and I do not wish to be considered 
as denying that the public has a right to exact wise and efficient manage- 
ment, then why should not society demand wise and efficient conduct 
of the great agencies of production? If a railroad manager is culpable 
and is answerable to society for anything less than a hundred per cent. 
of efficiency what of the farmer and planter, holding the great agency 
of production—land—and utilizing it with but forty per cent. of effici- 
ency? That is the indictment that stands against no small part of the 
agricultural community—a conduct of their business on a basis of forty 
per cent. of efficiency. It will not do to say that railroad managers 
and corporation heads are the representatives of publicly subscribed 
capital and are therefore subject, in the interests of society, to a sur- 
veillance that applies only to the affairs of a public corporation, while 
farmers represent only personal investment and may be left to work 
out with such ignorance or intelligence as they choose to bring to bear 
the conduct of their own affairs. Farmers and planters also owe some- 
thing to society in the way of intelligently conducting their. business. 
They hold the means of production in their control. The public interest 


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and the common good demand that they exercise that trust with intelli- 
gence, efficiency and thrift, quite as rightly as does public opinion 
demand efficiency and honesty in business administration. Prices of 
produce go up in answer to the inexorable law of supply and demand; 
values of the great agency of production—farm lands—have risen in 
our memory two or three hundred per cent., not because those lands 
were more efficiently managed, but because the demands of hungry 
mouths and backs to be clothed have made prices that permitted much 
increased values, even when not accompanied by increased efficiency 
of management. 

Is it not time for the maligned business man to direct some atten- 
tion to the honest farmer, and to ask whether the people, whose demands 
the politicians are so fond of formulating, should not have directed 
against them and their small business methods some of the same analyti- 
cal criticism that it has been the order of the day to direct against big 
business ? 

I believe that as a nation we have for some years been attacked by a 
hysteria of criticism against big business, until a majority of the people 
have come to believe that the way to secure prosperity is through legis- 
lation, instead of through intelligent hard work, improved methods, and 
a scientific application of the best knowledge to their own business. If 
you can do anything to direct the attention of the cotton planters of the 
south, or of the farmers of the whole country, to the fact that the funda- 
mental cause of the high cost of living is not to be found in the offices 
where big business is managed, but rather in the ignorance and ineffici- 
ency of management of their own farms and plantations, you will have 
done something to clear the atmosphere and to enable us some time to 
get ‘started on a new period of true prosperity. 

The particular men who happen for the moment to be occupying 
official positions in Washington and elsewhere, and who are laying 
unbearable hardships upon the proper development of business in the 
United States, are not perhaps primarily to blame. The blame lies back 
of them in an ill informed and frequently unfair state of public opinion. 
We have had a period of magazine and political muckraking which has 
brought about a condition where business success is looked upon as a 
crime, where the man who has demonstrated that he can manage his 
business well is excluded from public counsel and where no small part 
of our government affairs have been put into the hands of men who would 
be incompetent successfully to manage modest business affairs. 

It is idle to rail at the public representatives of one party or another, 
or at one administration or another. We have got to get back of all 
that and create a sounder, a more intelligent, and a more honest pub- 
lic opinion. That cannot be quickly done, and it will never be done by 
a policy of silence on the part of those who represent important busi- 
ness interests. You have got something to do besides run your cotton 
mills. You and other business men must wake up to the fact that you 
have a public duty in the education of public opinion, and so long as 
you refrain from exercising it, you will not only hinder the industrial 
and commercial development of ‘this whole country, but you will very 
directly permit your own business to be misunderstood and to be made 
the subject of unfair and uneconomic legislative attack. We are in a 
period of industrial and commercial depression. The marvel is not that 


9 


in spite of our great resources we are in such a period, but rather, with 
the terrible misunderstanding and misconception on the part of public 
opinion, that under a popular government, we are not in a condition of 
much deeper depression. 

I regret that I cannot at the moment see any marked tendency in the 
direction of business improvement. We have the promise of great crops, 
although there is much uncertainty between such an early promise and 
ultimate fulfillment. Should there be complete fulfillment of that promise, 
it would, of course, temporarily, at least, bring with it improvement. 
We may be permitted an increase of railroad rates, and that would be 
doubly helpful, first on the side of its direct benefit, but even more on 
the side of a promise of fairer treatment. Business conditions are 
unsatisfactory, however, on account of fundamental reasons that are 
deeper than can be cured by one or both of these factors. The incentive 
for business men to take new risks, to expand their activities, to lead 
them to the inception of new or greater enterprises has received a seri- 
ous check from the unfair attitude of public opinion as exemplified in 
Congress, by commissions, and in the printed page that reflects and 
molds the state of public opinion. I do not believe that we can hope for 
permanent relief from the unsatisfactory position in which business is 
now placed until we can get a public opinion that more truly reflects a 
fair attitude, based on correct economic principles. It seems to me the 
highest duty of business men, particularly such an influential group as 
is represented here, to contribute the best that is in them toward the 
creation of a wiser, a sounder, and a more intelligent public opinion in 
regard to business affairs. That can neither be done by silent acquies- 
cence, nor by dissatisfied grumbling at existing tendencies. You must 
take your active part in forming public opinion. It is time for business 
men to speak out. Where errors and mistakes have been made, let them 
be frankly acknowledged, but insist upon a better understanding of your 
methods, your problems and your aims. Let your voice be heard and 
your views expressed with frankness and honesty, and we may then hope 
that an intelligent and informed public sentiment will give to business 
men fair play, and to business an enduring foundation upon which sound 
prosperity may be solidly built. 


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